IMI employment expert Sally–Anne Hodder
It’s an important chance to recharge the batteries, and knowing exactly what you have to spend while you’re away can make all the difference. In my experience, calculating holiday pay can be a bit complicated for both employers and employees, so here are a few pointers that should help you all have a successful summer season.
Overtime
For employees who don’t do overtime and don’t receive commission as part of their monthly salary the calculation of holiday pay is simple. It’s the same as the pay you receive when you are at work. However, employees who do work regular overtime may receive holiday pay that takes this into account, depending on the type of overtime and how it is covered in the contract of employment.
Overtime that is guaranteed in the contract must be reflected in the calculation of holiday. For example, if an employee works 10 hours a month guaranteed overtime, they must be paid for five hours extra on top of their basic pay for a two week holiday.
Overtime that isn’t guaranteed but an employee is obliged to work when their employer asks them, this also has to be included when holiday pay is added up. Although only for the four weeks holiday that was covered by the Working Time Directive, not for any additional holiday or for Bank Holidays.
At the moment there is no obligation to include voluntary overtime in holiday pay. So, if it is accepted that as an employee you can refuse to work overtime when it’s requested, then don’t expect any extra money to be included in your holiday pay packet.
Commission
Again this is far from simple but, generally speaking, regular commission payments must be factored into holiday pay for the four week allocation guaranteed by the original Working Time Regulations. This was confirmed by a judgement handed down in February 2015. What hasn’t yet been decided is exactly how this calculation must be made. There are likely to be further judgements and regulations introduced on this matter in the near future, so employers would be wise to introduce an average commission element into holiday pay now to avoid expensive claims for underpayment later.
Sickness
This is far more straightforward. An employee on sick leave continues to accrue holiday as if they were working normally. Accordingly, their holiday pay will be calculated as if they are working normally too. Any guaranteed overtime they would have worked must be included, despite their having been off sick at any point during the accrual period.
Until the next issue I wish you all happy holidays.
If you have a comment on this or any other employment issue please email randr@theimi.org.uk.